TaxTMI 
TaxTMI 
2016 (5) TMI 1471
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....t that in the case of each loan creditor, there was credit entry of a corresponding amount immediately preceding the advancement of loan especially when loan obtained through banking channel does not make the transaction sacrosanct and the assessee failed to discharge the onus of burden of proof". 2. The main issue involved in the appeal is addition on account of unsecured loan aggregating to Rs. 2,02,50,000/- (disputed before us, Rs. 1,55,10,000) received by the proprietorship entities of the assessee from 29 persons. The background of the addition as been discussed by the AO is that a search and seizure action under section 132(1) was conducted in the case of Haresh Majethia. During the course of which, it has revealed that Majethia Brothers, that is, Haresh Majethia and Liladhar Majethia (assessee) through their various proprietorship concerns, partnership firms and companies were engaged in the real estate business as brokercum-investor and also in purchase and sales of land in Navi Mumbai. The assessee has two proprietary concerns, M/s Ekta Trading Co. and M/s K M Developers. During the search, certain loose papers were found which revealed that, several loans were ta....
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....iled explanation along with documents / evidences which has not been discussed in detail in the assessment order. The AO observed that, assessee has failed to produce single party for cross verification and many lenders filed their E-returns and sources of their income have been stated from 'income from other sources' and did not had Balance-sheet along with the return. From the perusal of their Bank Statement, he held that there is no regular or periodical income credited to the bank accounts. Thus, he concluded these are bogus transactions taken by the assessee in the form of loan before the purchase of a property by any of the group concern. His detailed conclusion has been discussed in para 5.4 to 5.7 of the assessment order. Thereafter, he discussed the concept of law of section 68 and various case authorities. Accordingly, he confirmed the unsecured loans which has been taken at Rs. 2,04,83,832/-, though the correct figure was Rs. 2,02,50,000/-. 3. Before the CIT(A), the break-up of loan taken by the two Proprietorship concerns from various persons were as under:- Sr.No. Name of the Party Amount(Rs.) Entities 1 M/s Ekta Trading Co. 1,22,60....
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..../- 7 Kalpana Valji Bhanushali 5,00,000/- 8 Khusali Atul Poladiya 5,00,000/- 9 Kishore V Kawa 2,00,000/- 10 Mahesh Bapat 20,000/- 11 Sakarbhai Nanji Satra 5,00,000/- 12 Vasant Morarji Karani (HUF) 5,00,000/- TOTAL 79,90,000/- It was clarified by the assessee that, first of all, the unsecured loans raised was Rs. 2,02,50,000/- and not Rs. 2,04,83,832/- as added by the AO; Secondly, it was pointed out that M/s Ekta Trading Co has taken loan of Rs. 61.50 lakhs from M/s K M Developers, (which is evident from above) both of which are proprietorship concerns of the assessee, that is, it has transferred the money from one pocket to another; Lastly, it was clarified that, some of the persons/entities are the sister concerns of the assessee and they were being assessed in the same charge and in their cases this issue of loan given to assessee has been discussed and analysed by the AO. 4. Apart from that, on merits, it was submitted that in order to prove the identity, creditworthiness of the 29 lenders and the genuineness of the transaction, following documents were placed on record before the AO:- "a.  ....
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.... Vasabt Morarji Karani (HUF) YES YES - YES YES - YES Ekta Trading Co. Loan Confirmation Details 01/04/2009 to 31/03/2010 Sr. No Name of the Parties . Confi- rmation IT Return Balance Sheet Bank Stat. PAN Card Our Bank Statement 1 Anish P Parab YES YES -- YES YES YES 2 Bharat Kanubhai Shah YES YES YES YES YES YES 3 Bharti Suresh Bhanushali YES YES YES YES YES YES 4 Champaben G Ruparel YES YES -- YES YES YES 5 Chunilal Premji Gosar YES YES -- YES YES YES 6 L R Shah (HUF) YES YES -- YES YES YES 7 K C Trevedi (HUF) YES YES -- YES ....
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....bsp;5. The Ld. CIT(A) after taking note of entire gamut of facts and evidences placed on record before the AO as well as during the appellate proceedings, deleted the said addition as per the discussion appearing from pages 13 to 15 of the appellate order. The sum and substance of the finding recorded by the Ld. CIT(A) are that:- (i) So far as addition relating to unsecured loans received from M/s K M Developers is concerned, she held that, loan aggregating to Rs. 79,90,000/- received from 12 parties had been repaid in the impugned year itself which is corroborated by Balance-sheet of the assessee placed in the paper books. Further, some of the parties are related to the assessee, that is, they were either brother of the assessee or partnership concern of his brother. All these entities/ persons are assessed with the same AO and in their Incometax records and Balance-sheet each and every item of loan given has been disclosed and the assessment have been made by the AO in these cases. Thus, the genuineness and the source stands established. (ii) From the perusal of the Bank statement, the Ld. CIT(A) noted that there is no instance of cash deposits, in t....
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....e modus operandi was unearthed during the course of search which revealed that, assessee was engaged in getting/procuring unsecured loans through circuitous route. In the light of these finding in the search, the unsecured loan received by the assessee in his two proprietorship concerns cannot be held to be genuine. He further submitted that, assessee failed to produce the lenders as required by the AO and thus, the creditworthiness cannot be accepted especially when AO has given a finding that "lenders were of men of little means". Thus, he strongly relied upon the order of the AO. 5. Before us, the Ld. Counsel for the assessee, Ms. Ritika Agarwal submitted that, firstly, in the case of the assessee's brother Haresh Majethia, the Tribunal vide order dated 10.04.2015 in ITA No. 3772 and CO No.192/Mum/2011 and ITA No.1220/Mum/2011 has deleted the similar addition on account of unsecured loans and interest on the ground that if the receipts and repayment of loan is corroborated by the ledger account and bank entries, addition in respect of such credits cannot be made. Here in this case also, the repayment of loan is fully corroborated by ledger account and bank entries. She ....
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...., then it is incumbent upon the AO to make relevant enquiry to controvert the evidences filed by the assessee, especially from the concern AOs of the lenders who are mostly family members and concerns. Once a lender has confirmed the giving of loan to the assessee and has corroborated such giving of loan through furnishing of income-tax return for the relevant assessment year, furnishing of bank statements in which such an amount has been reflected, then prima facie it cannot be held that the lender does not have the capacity to advance the loan or the creditworthiness of the lender can be doubted. To doubt the creditworthiness of the lenders in such cases, the AO has to bring specific material rebutting the stand of the lender that his confirmation is false and if at all any adverse inference has to be drawn then case of the lenders also need to be reopened or examined. Here in this case, the AO was specifically informed that some of the persons who were family members/concerns were assessed in his range only. For the other persons also specific details in this regard were furnished. The Ld. CIT(A) has categorically brought on record that, most of the amount has come from the fami....